Practise Questions

CP is a company specialising in supplying electrical materials to builders and one of its clients is LRC Pty Ltd. LRC is owned by Ethan Hocking. As business has been bad for LRC and their suppliers CP, they have been pressing Ethan for payment of goods supplied.

Moreover, CP requested Ethan to personally guarantee LRC debt to ensure a continuous supply. Ethan was not happy or inclined to provide such a personal guarantee but was persuaded to execute a written personal guarantee after CP Sale Manager assured him over the phone that the guarantee would not be enforced, and that the arrangement was being made for the purpose of re-assuring CP head office. Not long after, LRC entered administration and CP sought to enforce the personal guarantee assumed by Ethan Hocking.

In another matter, CP arranged for its Manager's office to be renovated. CP selected a 2 week period during which the Manager was away. Alite Pty Ltd (AL) was selected to carry out the renovation work based on the quote it submitted. The contract was signed subject to AL standard terms and conditions which were written in fine print on the back of the quote (an exclusion clause) . CP employees that were part of the contracting process were new to such process and failed to read the exclusion clause. CPs manager arrived visited Sunday evening to check how the renovation. He was dismayed to discover that his desk, which had passed down to him from the founder of the company, was broken and splattered with paint, including the leather top. This damage was due to the negligence of AL staff who performed the renovation. The restoration of the desk would cost $1200. CP made a formal complaint to AL five days later, where AL responded by pointing to its terms and conditions which stated that any complaint regarding their work should be notified within three days of completion of work and in any case, their liability for any loss is limited to $150, howsoever caused.

Based on the above

a) Advise Ethan Hocking as to whether he can challenge the enforcement of the personal guarantee he provided. 9 marks question

b) Advise CP as to whether AL can rely on the fine print to avoid or limit their liability to CP. 12 marks